• Home Guaranty bankrupt


    AFTER 11 years of “continuous losses,” the financial resources of the Home Guaranty Corp. (HGC) have been depleted and the agency now risks losing the capacity to provide guarantees for housing loans, according to the Commission on Audit (COA).

    The HGC’s “losing streak” prompted COA to sound the alarm after discovering during its audit conducted in 2012 that the government-owned and –controlled corporation (GOCC) has racked up a deficit of P13.296 billion.

    Government auditors said that for the last 11 years, HGC’s performance was “underwhelming” because of its previous defaults on its guaranteed mortgages.

    “[This] resulted in accumulated deficit of P13.296 billion as at December 31, 2012, thereby further depleting HGC’s financial resources that diminishes its capability to provide guarantee for loans supporting a viable shelter program,” the audit report noted.

    Auditors said that the accumulation of losses over time reduced the retained earnings of the company “to a negative balance.”

    The HGC provides risk coverage or guarantees and tax/fiscal incentives to banks and financial institutions granting housing development loans and home financing.

    It performs its mandate by working closely with the Department of Finance, Housing and Urban Development Coordinating Council, the National Economic and Development Authority and with other government housing agencies such as the National Home Mortgage Finance Corporation, Home Development Mutual Fund or Pag-ibig, Social Housing Finance Corporation, Housing and Land Use Regulatory Board and the National Housing Authority.

    State auditors said that the P2 billion loss, including the “comprehensive loss” of P575 million incurred in 2012, has seriously affected the financial condition of HGC.

    The audit agency said that the GOCC started its losing streak in 2002. It said that except for years 2007 and 2009, the HGC posted net income before charges were deducted.

    However, after making the deduction, the “yearly losses from 2002 to 2012” were discovered.

    These financial charges refer to interest worth P9.21 billion and other charges worth P640 million, attributed from sourcing the funds through bond flotation of P7 billion, P3 billion and P12 billion Zero Coupon Bonds.

    Included also in the financial charges was the interest on the issuance of debenture bonds in payment of HGC’s defaulted guaranteed accounts amounting P1.14 billion from 2006 to 2012.

    “The authorized capitalization of HGC is P50 billion, however, the paid-in capital received by the corporation from the releases of the national government stood at P14 billion only as of 2012 yearend,” COA said.

    The commission recommended that HGC strengthen its linkages with the national government, through the Department of Budget and Management, for the release of much needed capital. However, HGC officials claimed that in 2011 and 2012, there were notable increases in the outstanding guaranty, renewals and guaranty premium.

    The gross revenue also increased by 10.41 percent from 2011 to 2012 and the net income from operations rose by 14.39 percent for the same period, they said.

    “The foregoing showed that confidence of clients in HGC’s as a guarantor has been restored,” the company said.

    In its official website, the HGC said that it had P9 billion worth of housing securities in its portfolio as of 2007, and has issued a total of P 72.82 billion worth of guarantees to client / partner banks.


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    1. Why will they not be bankrupt when as Bobby above says, the officers of HGC are in business for themselves. They dig into foreclosed properties, get outsiders to partner with them in disposing the assets, and pocket the profits for themselves. This has been their modus operandi for years.

    2. It was foreclosed, bought by someone from the inside and sold for huge profit not for the government but for their pocket.

    3. Ive seen the way some of this runs, but i dont really understand the housing market here in the philippines. It doesnt seem to work on supply & demand. In the uk if there are lots of properties for sale the house price goes down, if there are more buyers than sellers the house prices go up. Here people just put any figure they like on their house. The people here seem to have to much money & will build a house over & above what they need & if it sells it sells, if it doesnt it doesnt, that can go on for years & they will do no maintenance & still increase the price of that house each year. In the uk we buy a house & we live in it, when we sell it we buy another house. when a bank repossesses a house they dont just want to gat their money back with a small profit they want the full market value of the house. I see the banks want huge profits but pay very low interest to depositors. Mortgages in the uk can be as low as 1.99% apr but here they are like 8 or 9%.

    4. Maybe they are not doing some sound investing. Also, if a property is in default for a while, foreclosure should done and sell the property to recoup at least if not all the mortage payable that was guaranteed by HGC thereby minimizing losses.

      • It has to do with the amount of defaulted loans and under performing assets that HGC have in its portfolio. If the properties are under water (owe more than what the value of the property), selling them will not allow the recovery of the principal. Your knowledge is very simplistic and basic. The residential mortgage system is lot more complex than that.